U.S. Strategic Bitcoin Reserve, Tariff War & Fearful Markets

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This Week’s Top Stories

“Trump Signs Executive Order to Establish Strategic Bitcoin Reserve in the U.S.” – Thursday, 6 March 2025

• During the night to today, President Trump has signed an Executive Order to establish the world’s first Strategic Bitcoin Reserve in the U.S., which will be capitalized with seized Bitcoin as part of criminal or civil asset forfeiture proceedings. The Bitcoin reserve does not involve taxpayer funds, and the seized Bitcoin will be held as a store of value and not be sold.
• In addition to the Strategic Bitcoin Reserve, the U.S. will also establish a Digital Asset Stockpile, which will include forfeited digital assets other than Bitcoin. As with the Bitcoin Reserve, no further acquisition of digital assets is planned. The Stockpile will be managed by the Treasury Department.
• One important part of the Executive Order: The Secretaries of Treasury and Commerce, namely Bessent and Lutnick, have been authorized to develop budget-neutral strategies for acquiring additional Bitcoin for the Strategic Bitcoin Reserve, provided that those strategies have no incremental costs for American taxpayers.
• The U.S. Digital Asset Stockpile will likely contain XRP, ADA, ETH and SOL, as Trump has announced last Sunday, and presumably other cryptocurrencies as well. However, there are no plans to purchase more of the assets in the stockpile.
• The U.S. governments public wallet currently holds roughly 200’000 seized BTC from Silk Road, the Bitfinex hack, and various other operations, such as the PlusToken Ponzi scheme. An interesting aspect of the approximately 100,000 BTC from the Bitfinex hack is that the coins could potentially be returned to Bitfinex, as indicated by a court document filed in early January this year. Legally, the U.S. government could retain the BTC, but current momentum leans toward returning it to Bitfinex after due process, meaning that the amount of BTC in the Strategic Bitcoin Reserve will likely be cut in half.
• Today, Friday, 7 March, at 19:30 CET, the White House Crypto Summit will take place, with various prominent industry leaders set to participate. Among them are Michael Saylor, David Bailey, Kyle Samani, Brian Armstrong, the Winklevoss twins, Brad Garlinghouse, and others.

“Trump’s Tariff War Continues – The Trump Shock?” – Monday, 3 March 2025

• The Trump Tariff Story continued this week as President Trump announced on Monday that he would raise the previous 10 percent import tariff on China to 20 percent and that the tariff on China, plus the 25 percent tariffs on goods from Canada and Mexico, would definitely go into effect starting Tuesday, 4 March. His announcement on Monday shook up the markets, and equities started trading to the downside.
• The story continued throughout the week as Canadian Prime Minister Justin Trudeau, Mexican President Sheinbaum, and representatives from Beijing all criticized Trump’s decision and announced counter-tariffs, with some measures taking effect immediately.
• On Wednesday and Thursday, there were further developments as Trump announced a one-month postponement of new tariffs on cars from Canada and Mexico but once again emphasized that reciprocal tariffs are still set to go into effect on 2 April. On Thursday, Trump signed executive orders to delay the tariffs on Canadian and Mexican goods that comply with the USMCA, which applies to roughly half of the imports from Mexico and one-third of the goods from Canada. However, the markets did not react very positively to the news, as there still seems to be a lot of uncertainty in the matter, with mixed signals coming from Trump and his team.
• It remains to be seen what today brings, especially regarding Europe, as Trump has not announced any new tariffs this week after threatening EU tariffs earlier in February.

A Quick Crypto Overview: The Wild Ride Keeps On Wildin’

At the time of writing last week’s wrap, Bitcoin traded below $80’000 again for the first time since early November 2024 and put in a temporary bottom after correcting down 28.5 percent from the current all-time high above $109’000. Bitcoin and the crypto market traded slowly to the upside over the weekend until Trump shook up the market on Sunday afternoon with his tweet about the U.S. Crypto Reserve, which included XRP, SOL, and ADA as potential candidates for the reserve. As seen in the chart below, his tweet ignited a sharp but short-lived rally to the upside on Sunday evening.

The rally was short-lived, however, and the crypto markets traded to the downside alongside the U.S. equity markets amid the above-mentioned tariff war. On Tuesday, Bitcoin found a floor above $80’000 and has since recovered quite a bit of ground, currently trading at $88’500 at the time of writing. As seen in the chart, David Sacks’ tweet about the newly signed Executive Order to establish a Strategic Bitcoin Reserve initially triggered a "sell the news" movement, as many market participants might have expected the U.S. to announce immediate Bitcoin purchases to grow the reserve.

While David Sacks stated in his tweet that “the Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional Bitcoin, provided that those strategies have no incremental costs on American taxpayers,” the market might need some time to digest this news and slowly realize that it opens the door to future BTC buys. At the time of writing, Bitcoin is trading to the upside as traders recognize the nature of this announcement.

Chart of the Week: U.S. Dollar Index Trading Lower

This week, the U.S. Dollar Index has taken a hit, losing over 3.5 percent since last Friday. A mixture of different factors could be behind this move lower: concerns over a weakening U.S. economy continue to grow, the postponement of a large part of the tariffs, the strength of the Euro this week – which had its best week since March 2020, up about 4 percent against the U.S. Dollar – the falling 10-year U.S. Treasury yields, and growing hopes for interest rate cuts by the Fed could all play a role in this downward move of the DXY.

A weakening of the U.S. Dollar Index may boost risk assets including bitcoin and crypto assets going further into 2025. Market participants are also looking back on the beginning of Trump’s first presidency in 2017, when the DXY traded to the downside throughout the year.

What’s Happening On-Chain? Insights on Stolen ByBit Funds, AAVE Tokenomics & Pectra Upgrade

The ByBit CEO Ben Zhou has shared an insightful summary on the stolen ByBit funds. Of the approximately 500,000 ETH stolen, about 77 percent are still traceable, while 20 percent have gone dark, and 3 percent have been frozen. Eighty-three percent of the ETH has been converted into BTC, and about 72 percent of the funds were traded into BTC through THORchain, which can be traced on-chain. The converted BTC has been split into almost 7,000 individual wallets.

AAVE has announced a new tokenomics update with several significant changes, leading to a more than 30 percent price increase for AAVE following the announcement on Tuesday this week. An important part of the proposal is the creation of an Aave Finance Committee, which is set to manage Aave’s treasury holdings and oversee a $1 million per week AAVE buyback program for six months, with plans to scale the program in the future. Another major change is the proposal to implement a new fee-switch mechanism that redistributes a portion of GHO stablecoin revenue to AAVE stakers. The goal is now to reach consensus on the proposal before moving to an off-chain Snapshot vote, then proceeding to a formal on-chain governance proposal before the final execution.

This week, Ethereum core developer Terence posted on X that the Sepolia testnet has successfully upgraded to Pectra with a perfect proposal rate. Ethereum’s upcoming Pectra hard fork will double the blob capacity for rollups and improve staking. The mainnet upgrade is scheduled for the beginning of April 2025.

Digital Asset Fund Flows: Record Weekly Outflows of $2.9 Billion

Last week, digital asset investment products saw record weekly outflows of $2.9 billion, marking the third consecutive week of net outflows and bringing the total three-week outflow to almost $4 billion.

Bitcoin led the pack with a total weekly net outflow of almost $2.6 billion, followed by Ethereum with $300 million in net outflows, while Solana saw net outflows of $7.5 million. Interestingly, Sui experienced net inflows of $15.5 million last week.

This week, both the BTC and ETH spot ETFs are poised to close the week with net outflows, further continuing the outflow streak. However, the net outflows are nowhere near as large as last week.

In other news, the Trump family project, World Liberty Finance, has currently invested a total of $336 million to purchase nine cryptocurrencies, including ETH, WBTC, AAVE, and others. Most of the assets were recently transferred to Coinbase Prime, but assuming the assets were not sold – which is impossible to determine – the current floating loss would be around $88 million, with ETH contributing the most to the loss at $67.5 million to date. World Liberty Finance stated that they are not selling tokens.

Market Sentiment: Fearful Markets Across The Board

The stock market is in extreme fear territory (18) following a news heavy week surrounding the Trump Tariff war and news around the Ukraine war. The CNN fear and greed index shows that the market sentiment right now is around the same level as it was back in August 2024.

AAII investors have restored some faith in the market, with some participants shifting their view from bearish to neutral, while the number of bullish members remained roughly the same compared to last week. The number of bearish members is still rather high (57 percent) compared to historical averages (31 percent), and such high numbers have historically often coincided with at least temporary bottom structures in the U.S. equity markets.

The crypto fear and greed index has recovered a little and is sitting in fear territory (34), up from extreme fear levels (10) last week.

Other Relevant News

• BlackRock will allocate 1 to 2 percent of its $150 billion target allocation portfolios to Bitcoin, investing in the $48 billion iShares Bitcoin Trust ETF (IBIT). – Link
• The Ethereum Foundation announced the appointment of Hsiao-Wei Wang and Tomasz Stanczak as co-executive directors. – Link
• Binance announced that it will delist all non-MiCA compliant stablecoin trading pairs in the European Economic Area starting March 31, including USDT. – Link
• The SEC has agreed in principle to dismiss its lawsuit against crypto exchange Kraken. – Link
• Swiss National Bank President Martin Schlegel rejects the idea that the central bank should hold part of its reserves in bitcoin. – Link
• The European Central Bank cut its deposit facility rate by 25 basis points to 2.5 percent, in line with market expectations. – Link
• SBF gives 45-minute interview to Tucker Carlson from prison. – Link

Looking Ahead: Bullish Long-Term News for Bitcoin & Correlation with U.S. Equities

Today, President Trump announced some positive news with the signing of an Executive Order to establish a Strategic Bitcoin Reserve. As market expectations were high and some participants were disappointed that certain altcoins were not part of the reserve and would not be bought by the government, the initial reaction of the market was not entirely positive. Once the market realizes the positive nature of the Executive Order for Bitcoin, this might change soon.

The U.S. Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional Bitcoin, provided that those strategies have no incremental costs for American taxpayers. It will be of utmost importance to look out for news in this regard. With the U.S. now having set the stage for Strategic Bitcoin Reserves, it will also be interesting to observe the reaction from other nation-states. Market participants should not forget the Lummis Bill and the various Bitcoin bills in several U.S. states, some of which are on the verge of getting the final green light.

Bitcoin has just undergone a 28 percent correction and is trading just below $90’000 amid the tariff conflict in traditional markets, with the S&P 500 and Nasdaq correcting 5–10 percent from their recent all-time highs. Bitcoin’s correlation with U.S. equities has risen considerably since the beginning of the year, suggesting that Bitcoin and the crypto markets are likely to follow suit with the price action of traditional markets until further notice.

While the news about the Strategic Bitcoin Reserve is bullish for Bitcoin, the question of its impact on the price action of altcoins remains to be seen. It could further enhance the disconnect between Bitcoin and other cryptocurrencies, as has been the case so far this cycle. Specific altcoin news, such as the updated tokenomics for AAVE, has the potential to drive attention to certain altcoins over the coming months, so it might be worth keeping an eye on such announcements from other comparable projects in the DeFi landscape.

Below, you can find some of the key data releases and events to watch out for next week.

Monday, 10 March 2025

• Japan – GDP

Wednesday, 12 March 2025

• USA – CPI and Core CPI

Thursday, 13 March 2025

• Switzerland – PPI
• USA – PPI and Core PPI, Initial Jobless Claims, Continuing Jobless Claims

Thursday – Friday, 13 – 14 March 2025

• WEB3 Amsterdam